The last word: Cutting out the errors in paperwork

Feature

posted 15 Mar 2005 in Volume 1 Issue 8

The last word: Cutting out the errors in paperwork

By John Lamb

Errors in electronic documents are costing business dearly, but now manufacturers and retailers have got together to try clean up the information that oils the wheels of trade. They have embarked on a massive effort to agree standards that will enable them to exchange data accurately anywhere in the world.

A US industry study carried out by consulting company AT Kearney estimated that $40bn, or 3.5 per cent, of total sales lost each year are due to supply-chain-information inefficiencies. The study showed that 30 per cent of data in retail catalogues contains mistakes, which cost between $60 and $80 each to put right and require 25 minutes of manual cleaning.

Overall, there are errors in the documentation associated with 40 per cent of all items that pass through the supply chain, according to Robin Howe, chief executive of UDEX, a company that sells services for checking product data.

“Software stops the transmission and someone has to re-key it,” explains Howe. “As a result that item is stalled and is carrying more cost than was expected. Some 12 per cent of errors pertain to pallet and case diversions, so warehouse management systems’ space allocation can’t work properly. In the same way planogram (shelf planning) systems in stores can’t be used either.”

Around 25-30 per cent of problems come from weight and volume errors that impacts shipping, claims Howe. The same proportion of errors involves inaccurate descriptions of products. For example, packets with an extra 10 per cent content may have a barcode that refers to the standard pack size. The end result is that systems can’t differentiate the sales of promotional items from those of ordinary packages.

Data gets out of kilter when manufacturers and retailers don’t use the same product descriptions or item numbers, or when there is no centralised way of updating product listings or adding new products. It is just too big a task for each business partner to synchronise data individually with one another. Currently, manufacturers have to provide multiple versions of the same information about their product lines. It is not uncommon for them to have to fill in 50 forms.

So, big companies such as Gillette, Wal-Mart, Procter & Gamble and Kraft have decided to try and cut down on the waste by ensuring that everyone refers to products and their attributes in the same way. They are backing an initiative called the Global Data Synchronisation Network (GDSN), created by the GS1 standards body.

“The global commerce initiative will see a 1-3 per cent reduction in direct supply chain costs,” says Hugh Roberts, president, International Commercial, at Kraft Foods. “In the longer term it will simplify industry collaboration. These savings can only be achieved by collaboration. The electrical industry never achieved a standard plug and voltage because it did not collaborate.”

GS1, which is responsible for both bar codes and the electronic product code (EPC) associated with radio frequency identification (RFID), has agreed many of the standards needed to track fast moving consumer goods (FMCG). The location, identification and attributes of products are covered by a series of standards that allow manufacturers, distributors and retailers to manage their supply chains more efficiently.

GDSN involves creating a single registry of product data backed up by a series of local data pools around the world. Manufacturers post detailed information to the pools. Retailers query the central registry and are directed to the appropriate pool to download the information via the internet to their back-office systems. GS1, based in Brussels, is in the process of setting up two networks to enable data gathered by trading partners from RFID and barcode scans, as well as from product catalogues, to be readily exchanged.

A network for swapping updated product data is already in action with five data pools around the world containing details of 180,000 products. So far, the data pools have handled some 180,000 requests. Although joining GDSN is cheap, at between a150 and a9,750 per year, the cost of implementing technology changes can be between a1.5m and a3m.

Suppliers have been slow to join the network. One of the reasons is that getting accurate data posted in the pools involves a lot of hard work. Information has to be collected from different parts of a manufacturing organisation, and individual products must be weighed and measured. Details of up to 151 attributes must be entered into the system and checked for accuracy.

Retailers have been cracking the whip with deadlines for their suppliers to get their data posted. But there are good reasons why the GDSN will catch on. Proponents point to significant savings. UDEX, for example, says that price synchronisation alone can increase the first time pass rate on invoices from 48 per cent to 80 per cent, with suppliers getting paid quicker.

The growing popularity of online trade also demands more efficient fulfilment, which is only really possible with well synchronised data. The next three years are tipped to see a very rapid increase in the use of exchanges, several of which are already closely involved in synchronisation.

In addition, the expected shift to RFID will trigger a need for accurate, easily accessed product information. RFID’s electronic-product code (EPC) uses the same product identification standards as GDSN.

This year a second network, for EPC data, will come on stream. “2005 is the year of the network,” said Henri Barthel, technical director of EPCglobal, the organisation responsible for RFID standards. “By the middle of this year we will have the majority of standards and by the end of this year we will have the network up, but it will be a further three or four years before we will link the two.”

The benefits of data synchronisation may require some hard graft to achieve, but over the past year the calls to action from retailers have turned synchronisation into a no-brainer for many manufacturers.

The realisation of the financial benefits of sharing common data may take a little longer, but there is no doubt of its importance to e-commerce.